Routine Innovation And Evolution Of Logistics Service Provider's Capabilities

Evolutionaryeconomics borrowed from biology the concept of gene,and put forward an important concept of routine and evolutionary model of routine which provides a dynamic research framework to explain the evolution process of economic system.As the micro-foundation of organizational capability,Routine provides a new way for capability study.Taking into account the features of logistics,this paper argued the competence of logistics firms comes from the combination of operational capability and absorptive capacity(AC).Operational capability is the basic capability of sustaining the operation and survival of a firm under current business model.It consists of sub-capabilities together with a collection of organizational operating routines and relevant resources.The sub-operational capabilities are divided by value chain activities.As a dynamic capability with strategic flexibility of reorganization of routines and resource re-deployment to adapt to environmental changes,Absorptive Capacity consists of a collection of organizational search routines to carry on routine innovation process.It has two components,namely internal and external AC capabilities.The Absorptive Capacity is created by changing the content and composition of operation capability and the resources configuration.The competence of a logistics firm results from the combination of organizational routines and the resources they control at three levels:individual,operational and managerial.Research identified the routines and their features at different levels.It indicates that the evolution of the competence of a logistics service provider with absorptive capacity as its dominant factor is a process,during which a firm actively seeks for the variation of the routines so as to facilitate the upgrading of its capabilities.During the process,absorptive capacity plays an important role of guiding the evolution of operational capability and promoting the upgrading of the capabilities at different levels.This includes the processes of the triggering of routine search,the input of new knowledge,multi-level routine variation,selection,replication and upgrading of capabilities,and so on.In this paper,based on Absorbing Capacity of logistics service provider,a multi-level routine innovation model was created;and routine innovation model is divided into two stages:design stage and performance stage.The first design phase is to complete the design of all kinds of new ostensive routines;the new routines must undergo a multi-level systematic selection process,in which the management sector plays a crucial role.In this stage,external absorptive capacity dominates the input of new knowledge which is gained from the multi-level knowledge sharing pipelines embeddedin the cooperative and communication routinebetween logistics service provider and customers in the value chain.The pipelines provide an access to the value-added knowledge of targeted segmentation.The new ideas and thoughts,generated by the input of new knowledge and guided by the routines of internal Absorptive Capacity,will lead to variations after being integrated with the existing routines of operating capabilities and produce new routines combination.This part of routine innovation is achieved by the participation of all the sub-capabilities of operational capability with a focus on customer value creation.As a result,new products and services routines combinations are created.Then,the managerial level will form the Logistics service company's new strategic ostensive routines,to redefine the new customer value proposition,clarify the capability gap;The second phase is the performance process of which is to enhance the capability by replicating the new routines under different circumstances.New knowledge will proliferate within the organization by replication,performing new routine can form the performative part of new routines,improve the cognition level of routine participants,integrate the complementary resources,optimize and upgrade the existing resources,all these moves will greatly improve new routine's performance.And the establishment of the new strategic routines and their performance is subject to the consistence among operational capability and routine collections,ostensive routine and performative routine,routines and resources,performace stage is an important path of capability evolution.As a participant in customer's supply chain,logistics service provider's value activities are the extension of the customer value chain.This paper puts forward the concept of "linkage routine",similar to the central nervous system of human body,acting as the connecting bridge between Absorptive Capacity and the Operate capability,is a transmission channel of knowledge and complementary resources information across organizational boundaries and internal hierarchical levels.It plays an important role of facilitating innovation activities,and coordinating value chain activities.This paper constrcuts Identification model and matrix of key operating capabilities based on customer value,and the model is validated in the empiricalcase studies in the Chinese logistics industry.Identify thekey operating capabilities that significantly impact customer value in terms of economic value,functional value and mental value.Finally,in the form of case study,this paper illustrated the transformation of business models for logistics service provider A over the years.Along with the process of routines innovation and change of operating capability,it has evolved from a Courier company into a contract logistics service provider in terms of Business Model innovation.